SCO to fight US bankruptcy trustee’s motion to liquidate it

The Department of Justice's Trustee program, which has finally had enough of …

SCO, the dying Utah UNIX vendor, could finally be headed for Chapter 7 bankruptcy and liquidation. The US Trustee representing the Justice Department in SCO's bankruptcy proceedings has filed a motion to dissolve the company, asserting that its repeated attempts at reorganization have failed and that it has practically no hope of recovering. CEO Darl McBride says that SCO intends to fight the motion.

SCO achieved infamy by attempting to sue users of the open source Linux operating system, alleging that Linux misappropriated intellectual property from UNIX. In 2007, a judge ruled that Novell is the rightful owner of the original SVRX UNIX copyrights and not SCO. Without standing to bring a lawsuit over SVRX copyright infringement, SCO could not proceed with its litigation against Linux users. During the case, evidence emerged which unambiguously indicated that SCO's own internal audits of Linux source code showed no evidence of infringement. Further, the court found that SCO's sale of broad SVRX licenses was a violation of its contract with Novell and ordered SCO to pay millions of dollars to the Linux company.

SCO's stock price collapsed as investors bailed. Left with a huge debt, an aging UNIX product that isn't competitive with Linux, and no hope of generating more revenue from SVRX licensing or litigation, SCO appeared to be doomed. The company filed for Chapter 11 and attempted to salvage its remaining business interests and last long enough to appeal the ruling.

SCO has attempted four separate reorganization plans, all of which have been unsuccessful. The company's latest strategy is to try to sell off its remaining assets, including its mobile business. SCO offers remote UNIX administration tools for smartphone devices and has also developed iPhone applications with several partners, including Genisys and FranklinCovey.

Novell has consistently objected to SCO's reorg attempts and characterized them as futile from the start. The DoJ's Trustee program has apparently come to view the situation in a similar light. In a motion filed with the bankruptcy court, the DoJ Trustee contends that it's time to convert the status of SCO's bankruptcy to Chapter 7, citing "substantial or continuing loss to or diminution of the estate and the absence of a reasonable likelihood of rehabilitation."

SCO CEO and deluded spinmeister Darl McBride says that SCO will oppose the motion and plans to present a new reorganization plan to the court.

"We are reviewing the motion that was filed in Delaware today with counsel and will have a detailed response for the court in due course," McBride told the Salt Lake Tribune. "We plan to oppose the motion and present our own suggested course of action to the court."

SCO is currently in the process of appealing the original 2007 ruling which established that Novell is the owner of SVRX. Boies Schiller, the law firm representing SCO, agreed to cap its legal fees in 2004 in exchange for a cut of any winnings. As a result of this deal, the law firm is continuing to represent SCO in its appeal before the 10th Circuit. A Boies Schiller lawyer recently told Law.com that the firm's involvement with SCO is "way into the red."

There doesn't seem to be much potential for SCO to recover from its fall. The company is still bleeding money and its debts are steadily climbing while its reorganization plans consistently fail. A transition to Chapter 7 could finally bring the company's shenanigans to an end.